The UK Government marked the recent Small Business Saturday – 3rd December 2022 – with the announcement of a comprehensive review into how late payments for small businesses can be effectively tackled.

Business Secretary Grant Shapps confirmed the news of the review as he urged large firms to ensure they paid their smaller suppliers promptly.

A longstanding problem – but will the Government take meaningful action?

As we are unfortunately well-placed to know ourselves here at TS Partners as key providers of accounting and payroll services for small businesses in Plymouth, Wellington, and Newton Abbot, the problem of late payments has been a long-running one for a great number of small firms.

When a small company doesn’t receive payment on time from a business it supplies, it often has to spend significant time and resources chasing that payment. This can lead to problems with cash flow, potentially imperilling the entire business and preventing it from growing.

It is therefore welcome news, at least on the surface, that the Department for Business, Energy & Industrial Strategy (BEIS) has said a “Payment and Cash Flow review” will be carried out, putting the microscope on “existing payment practices and the measures in place to make sure small firms are not ripped off by their larger clients – with over £23.4 billion currently owed in outstanding invoices to UK businesses.”

The department said that the review will assess the progress that has been made in certain industries in combatting late payment, while an in-depth examination will also be undertaken of current payment reporting regulations and the Prompt Payment Code.

Furthermore, BEIS stated that the statutory review of the Small Business Commissioner will help make sure optimal arrangements are in place in support of UK small firms.

A cautious welcome for news of greater scrutiny of late payments

In announcing the review, Mr Shapps described the UK’s 5.5 million small firms as “an integral part not just of our economy, but of our communities too, and this government is firmly on their side.”

The Business Secretary added: “That many small firms are routinely paid late is intolerable and presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.”

Meanwhile, small business minister Kevin Hollinrake said to the Financial Times that the government would look again at a controversial recent decision by ministers to reduce the research and development tax credits that small firms can access. Many start-ups and small and medium-sized businesses use these tax breaks.

However, not everyone seemed entirely convinced that the newly announced review would help bring about meaningful change.

Among the sceptics was the Federation of Small Businesses (FSB)’s external affairs chief Craig Beaumont, who said that “public policy change to tackle late payments has been stuck for years now.”

He added, however, that “if new ministers can breathe new life into this, and not just kick the can down the road to the election under cover of more consultations, then there is some cause for hope.”

We can be by your side to help you through the economic storm

Even during more stable and predictable times for the UK economy, it is fair to say that small firms can benefit considerably from well-placed expertise. When such firms are going through a period like the present when their entire survival may be at stake, this principle arguably applies even more so.

For a detailed conversation about the difference that could be made to your company’s growth prospects by TS Partners’ accountancy and payroll services for small businesses in Plymouth, Wellington, or Newton Abbot, please don’t wait any longer to get in touch with us via phone or email.